Consolidation and leverage: how to maximize your agency’s spend
Cooperative procurement – piggybacking on previously solicited and awarded contracts for goods, services and construction – is a growing public procurement phenomenon.
The growing interest in cooperative contracting was evident during the recent National Institute of Governmental Purchasing (NIGP) FORUM. In early 2020, NIGP signed an MOU with the National Cooperative Procurement Partners (NCPP), North America’s Association for cooperative procurement, to serve as the “strategic advisor” on the topic. As an extension of that agreement, NCPP sponsored a first-ever offered Cooperative Track during the virtual conference. The educational goal was to share the perspective from three angles of the contracting equation – agency procurement professionals, suppliers, and cooperative organizations.
Public Procurement’s Side of the Story
The University of California (UC) is one of the largest university systems in the nation. Its Strategic Sourcing Centers of Excellence leverage category expertise and procurement capabilities across all ten UC campuses. While the UC System can effectively solicit on their own, cooperative contracts have become a central part of its procurement strategy. “Having the resources and scale to approach strategic sourcing projects across ten campuses allows for tremendous opportunities,” says Executive Director Justin Sullivan. “When we can, we want to create opportunities for other public agencies to tap into that scale by serving as a lead agency. Imagine meeting with a school district in California to talk about putting more students on the path to a UC education, and also sharing that we can help them purchase better and more efficiently by allowing access to our competitively bid agreements.”
“Working collaboratively across a large system also presents challenges,” he says. The spend in Higher Education is incredibly diverse. We need help too, as we cannot possibly bid out everything. When our resources are stretched, we often research a specific category through cooperative agreements from multiple organizations to support our programs. Cooperative purchasing is a great facilitator of collaboration across public agencies with contracted suppliers.”
Municipalities often balance the need to strategically purchase while meeting diversity contracting goals. Yolanda Miller, Austin, Texas Deputy Procurement Officer provides leadership for the department’s small business outreach efforts. “Our team’s philosophy is do as much business as possible with local, small, minority, women and veteran-owned companies,” Miller says. “As some contract opportunities are too large for smaller firms, subcontracting might be an opportunity through a cooperative contract. We currently meet a minority subcontracting goal with our cooperative contract on office supplies. The awarded firm subcontracts with a minority-owned firm to take initial orders, process invoices and coordinate deliveries. We can meet our goals of better pricing with a large nationally recognized company, while providing a professional mentorship for this minority business. It’s a win for all the parties involved.
“When cooperatives started years ago, there was initial skepticism as we envisioned that our own bids could do better. However, through our research, we determined it makes better business sense to choose a cooperative contract for certain commodities like fleet and technology. Cooperative contracts offer benefits through broader product selections, and already negotiated pricing with added value components,” Miller says.
One prime success story was a city-wide project to remove all desktop printers and consolidate under a master contract. The initial phase was to remove printers from individual offices; however, many people were attached to their equipment. Realizing the city could not undertake such a large project by themselves, it contracted with a national supplier to provide not only the equipment, but additional services such as inventorying and consulting to roll out the new strategy. The selected company considered operational needs to transition the entire organization to multi-functional devices. Another benefit to the consolidation effort was the city moved to almost 100 percent use of recycled paper, thus meeting a huge sustainability goal.
Suppliers Offer an Another Perspective
On the supplier side of the contracting relationship, companies also benefit from competing for, and being awarded, a cooperative contract. Offering more robust product selections with accompanying services, the awarded contract can be used by multiple agencies, thus eliminating the need for the supplier to respond to hundreds of individual solicitations. Those savings may be incorporated into better pricing through the awarded cooperative contract.
WESCO is a global electrical, communications and supply chain solutions company that serves a wide range of organizations – both public and private. Rob Bezjak, Director and General Manager of SLED National Sales and Marketing recognizes the changing agency-supplier relationships within the government sector. He suggests, “to obtain the full value of a supplier relationship, share information early in the process. The more we know about the problem to be addressed, then our proposed solution can be that much better. During the initial COVID response, we were able to transition our private industry experience in supporting remote work locations and videoconferencing, and quickly pivot to apply that knowledge toward government teams.”
With many facing budgetary impacts, Bezjak offers the following advice, “consider consolidating spend wherever possible to drive savings, not only for volume price discounts, but also savings through consolidated delivery and invoicing through one contract. As WESCO holds several cooperative contracts, Bezjak shares the four main reasons why agencies use their cooperative contracts: 1) depth and breadth of the products offerings through larger catalog offerings; 2) elimination of the time-consuming process for an agency to issue and award their own solicitation; 3) increased scale as many agencies use the contract to create a greater value proposition; and 4) assurance of compliance for agencies to be confident all procurement rules have been followed.
Anna McClelland, Vice-President of Specialty Markets for OFS Brand supports universities, school districts and municipalities with furniture needs. Responding to the new health and safety requirements related to COVID-19, institutions are rethinking their current open floor plans, while structuring a setting where people can still work and learn in person. “We can still support an open floor plan concept, with flexibility in arranging the furniture for social distancing, coordinating traffic flow, installing screens and planter boxes, and adding sanitation stations,” McClelland says. “Even the type of product choice is important to retain durability due to increased cleaning and disinfection. In a partnership relationship through our cooperative contracts, our teams can work more collaboratively toward new solutions.”
Cooperative Viewpoint Completes the Story
Sourcewell is a governmental cooperative with over 100,000 government and non-profit members who utilize contracts, ranging from office supplies and computers, to fleet and emergency vehicles. Duff Erholtz, Client Development Administrator, fields requests from procurement professionals across the country regarding the use of cooperative contracts. According to Erholtz, “the foremost question received is related to compliance, as members want to ensure public procurement policies have been followed during the solicitation process. The second set of questions is usually related to contract terms and pricing.” As a cooperative solicits and awards a contract on behalf of agencies across the nation, Erholtz says, “we understand that local municipalities may have their own unique terms and conditions or want to tailor the indemnification language. Many cooperative contracts allow, through a participating addendum, for the public agency to introduce unique terms and conditions or special requirements. Most suppliers will approve these additions to best serve the organization.”
As part of building a procurement strategy around the use of cooperative contracts, Erholtz suggests, “the key is to educate and collaborate with decision makers across the agency before going down the road toward cooperative contracts use. Lean on your cooperative partners to provide educational content and answer any legal or policy questions related to the contracts. Having those important conversations beforehand helps bring the whole organization toward a cooperative procurement strategy and leverage the full benefits of efficiencies and savings.”
Jeff Drury, Director of CHOICE Partners national purchasing cooperative adds his perspective, “if everyone bought on price alone, then there is no need to look further than low bid contracts. The key benefits of cooperative contracts are both advantageous pricing and valued-added services. As due diligence is conducted, my suggestion is to consider customer service as part of the total package. Cooperatives should be able to assist your teams in finding the information needed and be responsive to customers.”
The Future will Require Paradigm Shifts
Antiquated rules and policies, implemented from older technologies or political agendas of the past, can often constrain today’s public procurement processes. In light of present realities, the challenge for procurement is to question the status quo and determine if new paths are required to support changing needs for both the agency and its constituents. If the answer to the question, “Why do we do it this way?” is answered by “because that’s the way we’ve always done it,” it might be time to ask new questions and make needed changes. Many tried and true practices may need to be revised or updated, particularly to increase responsiveness, for the new reality.
The County of San Diego’s Purchasing & Contracting Department is nationally recognized for its customer and mission focused approach. Director Jack Pellegrino says, “one of the keys to our success is how we organize ourselves around customer departments and their mission requirements. By really understanding the customer’s business, as well as the timing of upcoming needs, we can create a procurement action plan for contracts to either renew or initiate new solicitations to support upcoming needs. We often look to cooperative purchasing options as a first tool in new acquisitions because of the expedited contract award timing and leveraged pricing. If a solicitation has already been competitively conducted, and can serve the volume scale of the county with advantageous pricing, then for sheer efficiency, it makes sense to use cooperative contracts to meet our customer’s needs in an expedited, timely manner.”
Tammy Rimes is the executive director of the National Cooperative Procurement Partners (NCPP), North America’s Association for cooperative procurement.